Smart Accounting Strategies Every Startup should Adopt in 2021
Startups and SMEs are the backbones of every economy. The UAE has built a favorable ecosystem for startups and small businesses over the years. Yet, along with the stories of startup successes, there is an alarming number of startup failures as well. We can attribute the reasons for startup failure to cash flow issues along with many other challenges. Many of these challenges can be navigated with the help of top accounting firms in UAE Meanwhile, we list here some effective accounting strategies that every startup should adopt in 2021. Read on.
1. Know the Laws and Regulations
Entrepreneurs should keep abreast of the latest regulatory changes in the UAE to ensure that the company is on the right side of the law. Right from 2018, the accounting & bookkeeping burden on companies has increased with the introduction of VAT. It was followed by Economic Substance Regulation (ESR) and Ultimate Beneficial Ownership (UBO) laws. It is an accountant’s job to look after the responsibilities including VAT return filing, maintaining books of accounts as stated in VAT laws, ESR laws and UBO regulations.
Non-compliance with each of these regulations will lead to hefty fines that may tarnish the image of the company apart from causing financial loss. Most startups employ a single accounting professional who may not be able to manage the multiple regulatory compliance requirements. This is where the assistance of accounting firms in Dubai comes in handy for the startups.
2. Put Personal and Business Expenses Apart
Smart entrepreneurs know how to draw the line between their professional and personal lives. However, the same individuals commit the serious folly of mixing their personal and business expenses. An entrepreneur who can’t keep both expenses separately will lead the startup to a bumpy road. If you think this aspect applies to you, start with opening separate bank accounts for personal and business expenses ( if you haven’t done it already).
3. Save for Rainy Day or Sunny Days
Since the outbreak of the pandemic, every business owner seems to have realized the importance of setting aside cash for the future. The emergency funds will come in handy for you if any unexpected event strikes. Sometimes, it may help you pay the tax amount when it’s urgent. Saving for the future will help you avoid running up business credit cards.
4. Chase the Late Payers
Effectively managing cash flow is the biggest challenge to startups, especially in the pre-funding days. A month where invoices failed to get paid may prove hell to your business and may wreck your ability to pay the bills. This often happens when your clients fail to pay on time. Your terms & conditions should include payments and terms and clauses for actions to be taken of clients Don’t pay on time. If your bills are due on account of a client that pays late, you should be ready to enforce the consequences. Don’t worry about losing a client, because clinging on to a habitual late payer will only damage your business.
5. Adhere to Effective Inventory Management
Inventory management is a crucial cog in the wheel of a business’s profitability. However, most startups and small businesses are unaware of good inventory management practices when it comes to the items they sell. Some businesses have too little inventory that makes them unable to meet customers’ expectations. Many other businesses overstock items that will lead to bleeding of money out of your business. Little inventory will drive the customers away and excess inventory will break your cash flow. Effective inventory management kids somewhere in between and the best accounting firms in Dubai can advise you about how to manage inventory without challenging the cash flow.
6. Effective Backup Solution for Records
Finding an effective cloud-based backup solution is essential for your business. If your accounting system is not proper, it will result in the destruction or missing of vital financial records. The Federal Tax Authority (FTA) may ask you to show some of the records during a tax audit and your inability to present the records may land you in trouble. Similarly, failure to maintain UBO records from the destruction of loss is a serious offence as per item number 7 of Cabinet Decision No 53 of 2020 on UBO administrative penalties. Accounting firms in Dubai can suggest to you the best cloud-based storage solutions for your accounting records.
How can Leads Oman Accountants Help you?
From managing the cash flow to ensuring compliance with the regulations, an effective accounting strategy determines the successes of startups in the UAE. However, startups and SMEs lack a well-developed accounting team. However, the assistant of experienced accounting firms in Dubai such as Leads I.T & Accountancy can bring positive changes to a startup’s growth. Leads ACC has a team of highly qualified accounting professionals who can help you meet obligations such as VAT filing, ESR and UBO requirements. With Leads ACC’ bespoke services, startups can aim for higher business accomplishments.